Kotak Securities is bearish on HUL has recommended sell rating on the stock with a target price of Rs 1500 in its research report dated October 15, 2018.

HUL has delivered another strong quarterly performance, with double digit sales YoY growth across all three divisions of home, personal care and food. Overall domestic volume growth was in line with estimates at 10% for Q2FY19 versus 12% sequentially and 4% YoY. Net sales grew 11.1% YoY to Rs 92.3 bn indicating a YoY price increase of meagre 1.1% because of intense competition. However, the company is growing ahead of the industry on the back of WIMI strategy, as also innovations and activations. The company also continues to make margin gains through cost management and favorable product mix.

Outlook

However we believe, sustaining the current level of super normal growth in the longer run would be a huge task for HUL which is trading at super rich valuation of 43.9x FY20 earnings. Post correction of 15% in the last 45days, we continue to recommend SELL on HUL with a decreased TP of Rs 1500 at 42x FY20 earnings (from Rs 1610 at 45x).

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